General Electric's $4.5B Dividend Slated for Buybacks

More buybacks are forecasted as GE continues to shrink its financial arm.

NEW YORK ( TheStreet) -- General Electric ( GE)'s $4.5 billion "special dividend"--to be paid from GE Capital to the parent company--will be used entirely for buybacks, GE Chairman and CEO Jeff Immelt told investors at an industry conference Wednesday.

The buybacks will add roughly three cents per share to GE's 2013 earnings, according to a report from Citigroup published Thursday.

More earnings from the industrial side will spur investors to pay a higher multiple for GE shares, Citigroup argues.

"We believe GE Capital should continue to generate excess capital even as it continues to pay 30% of its net income to the parent company in dividends, and see the distinct possibility of further special dividends from GECC to the parent over the next few years," the report states.

Citigroup argues the payouts will lead to an ever-greater share of GE's earnings coming from its industrial businesses as opposed to its financial arm--a development that should lead investors to pay a higher multiple for General Electric shares.

Citigroup reiterated its "buy" recommendation on GE.

"There is no question that the dark days of the financial crisis and recession shook GE investor confidence. With those days thankfully behind the company and armed with lessons learned, we believe coldeyed investors should be increasingly encouraged about the prospects for GE's growth machine to get back on track," the report states.